Why Dogecoin Is Soaring Higher Today

The cryptocurrency Dogecoin (CRYPTO:DOGE) is trading higher on Friday. The meme coin was up 7.5% as of 3:35 p.m. ET from yesterday at 4 p.m. ET. The gain comes as the S&P 500 gained 0.4% and Bitcoin gained 2.5%.

The upward move was driven by the Securities and Exchange Commission's (SEC) announcement that it had received an application from the asset manager Greyscale to create a Dogecoin exchange-traded fund (ETF).

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What happened

Although Greyscale's intention to create a Dogecoin ETF was already known, the SEC's formal acceptance of the application starts the clock on its review process. The regulator will now have until mid October to deliver a verdict. Dogecoin is not alone; the SEC is also considering ETFs for XRP, Solana, and others.

Why it matters

The approval last year of Bitcoin ETFs helped drive the crypto to new heights. The ETFs helped more investors, both retail and institutional, gain exposure to Bitcoin, providing ease of access, liquidity, and legitimacy. It's more than likely Dogecoin would benefit as well if the SEC grants approval.

However, there are some key differences between Dogecoin and Bitcoin that may keep the SEC from giving its blessing, namely the fact that Dogecoin is a meme coin. Even if it does receive approval, the fact remains that the coin derives its value from little other than hype. The coin is particularly volatile and prone to larger and more irrational swings than Bitcoin. If you are looking to invest in crypto, consider looking elsewhere.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Solana, and XRP. The Motley Fool has a disclosure policy.